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William Lee is an exterminator who finds that his wife Joan is stealing his insecticide (pyrethrum) to use as a drug. When Lee is arrested by the police, he begins hallucinating because of "bug powder" exposure. He believes he is a secret agent with two handlers or controllers in the forms of a talking insectoid typewriter and an alien "Mugwump". The typewriter/bug assigns him the mission of killing Joan. She is allegedly an agent of an organization called Interzone Incorporated. Lee dismisses the bug and its instructions and kills it (smashes the typewriter). He returns home to find Joan sleeping with Hank, one of his writer friends. Shortly afterwards, he accidentally kills her while attempting to shoot a drinking glass off her head in imitation of William Tell.

Having inadvertently accomplished his "mission", Lee flees to Interzone. He spends his time writing reports for his imaginary handler, and it is these documents which, at the insistence of his literary colleagues, eventually become the titular book. Whilst Lee is under the influence of assorted mind-altering substances, his replacement typewriter, a Clark Nova, becomes a talking insect which tells him to find Dr. Benway by seducing Joan Frost. Joan, curiously, is a doppelgänger of his dead wife.

After coming to the conclusion that Dr. Benway is, in fact, the secret mastermind of a narcotics operation for a drug called "black meat" which is supposedly derived from the guts of giant centipedes, Lee completes his report and flees Interzone to Annexia with Joan Frost.

Stopped by the Annexian border patrol and instructed to prove that he is a writer as he claims, Lee produces a pen. As this is insufficient proof for passage he inexplicably offers a demonstration of his William Tell routine using a glass atop Joan Frost's head. He again misses badly and thus re-enacts the earlier killing of his wife. In a scene that transcends conventional understanding the border guard cheerfully bids him welcome to Annexia. Lee is shown shedding a tear at this bittersweet accomplishment.

The screenplay for Naked Lunch is based not only on Burroughs' novel, but also on other fiction by him, and autobiographical accounts of his life. It can be seen as a metatextual adaptation, in that it depicts the writing of the novel itself. Several characters are loosely based on people that Burroughs knew: Hank and Martin are based on Jack Kerouac and Allen Ginsberg (who assisted Burroughs in compiling the original novel), and Tom and Joan Frost on Paul and Jane Bowles whom Burroughs befriended in Tangier, Morocco.

The shooting of Joan Lee is based on the 1951 death of Joan Vollmer, Burroughs’ common-law wife. Burroughs shot and killed Vollmer in a drunken game of "William Tell" at a party in Mexico City. He would later flee to the United States. Burroughs was convicted in absentia of homicide and sentenced to two years, which were suspended. Burroughs later expressed Joan's death as the starting point of his literary career, saying: "I am forced to the appalling conclusion that I would have never become a writer but for Joan's death".

The film score is composed by Cronenberg's staple composer, Howard Shore, and features free jazz musician Ornette Coleman. The music of the Master Musicians of Jajouka is also featured throughout the film. The use of Coleman's composition "Midnight Sunrise", recorded in his "Dancing In Your Head" album, is relevant, as author William S. Burroughs was present during the 1973 recording session.[5]

Critical reaction was positive; it currently holds a 71% rating on Rotten Tomatoes, based on 31 reviews.[6]Metacritic reported an average rating of 67 out of 100, based on 16 reviews.[7]Roger Ebert gave the film two-and-a-half stars out of four and wrote, "While I admired it in an abstract way, I felt repelled by the material on a visceral level. There is so much dryness, death and despair here, in a life spinning itself out with no joy".[8] In her review for The New York Times, Janet Maslin wrote, "for the most part this is a coolly riveting film and even a darkly entertaining one, at least for audiences with steel nerves, a predisposition toward Mr. Burroughs and a willingness to meet Mr. Cronenberg halfway", but did praise Weller's performance: "The gaunt, unsmiling Mr. Weller looks exactly right and brings a perfect offhandedness to his disarming dialogue".[9]Richard Corliss of Time gave a lukewarm review, calling the film "tame compared with its source".[10] In his review for the Washington Post, Desson Howe criticized what he felt to be a "lack of conviction".[11]

Newsweek‍ '​s David Ansen wrote, "Obviously this is not everybody's cup of weird tea: you must have a taste for the esthetics of disgust. For those up to the dare, it's one clammily compelling movie".[12]Entertainment Weekly gave the film a "B+" rating with Owen Gleiberman praising Weller's performance: "Peter Weller, the poker-faced star of RoboCop, greets all of the hallucinogenic weirdness with a doleful, matter-of-fact deadpan that grows more likable as the movie goes on. The actor's steely robostare has never been more compelling. By the end, he has turned Burroughs' stone-cold protagonist — a man with no feelings — into a mordantly touching hero".[13]

In his review for the Village Voice, J. Hoberman wrote, "Cronenberg has done a remarkable thing. He hasn't just created a mainstream Burroughs on something approximating Burroughs's terms, he's made a portrait of an American writer".[14]Jonathan Rosenbaum in his review for the Chicago Reader wrote, "David Cronenberg’s highly transgressive and subjective film adaptation of Naked Lunch ... may well be the most troubling and ravishing head movie since Eraserhead. It is also fundamentally a film about writing — even the film about writing".[15]

Burroughs scholar Timothy S. Murphy found the film to be a muddled adaptation that reflects Cronenberg's mind more than the novel: he feels that Burroughs' subversive, allegorically political depiction of drugs and homosexuality becomes merely aesthetic. Murphy argues that Burroughs' social and politically situated literary techniques become in the film merely the hallucination of a junkie, and that by using the life of Burroughs himself as a framing narrative, Cronenberg turns a fragmented, unromantic, bitterly critical and satirical novel into a conventional bildungsroman.[16]

The film has been selected for a Criterion Collection release, an organization that releases high quality DVDs for important classic and contemporary films.

In The Simpsons episode "Bart on the Road", Bart, Nelson, and Milhouse use Bart's fake driver's license to get into the theatre to see an adult film. The film they choose, based on its rating, is Naked Lunch. When they exit, Nelson looks up to the marquee and says, "I can think of at least two things wrong with that title."[18]

In 1994, Bomb the Bass released the single "Bug Powder Dust" which opens with the quote "I think its time to discuss your, uh, philosophy of drug use as it relates to artistic endeavour" and closes with the quote "I think its time for you boys to share my last taste of the true black meat: the flesh of the giant aquatic Brazilian centipede." The song also includes various other quotes, items and themes from the film woven into the lyrics.[19] Additionally, the album as a whole, "Clear" is stylised to be reminiscent of the film's advertising material.